China demand drives cotton higher

By Staff -- Home Textiles Today, 5/5/2003 12:00:00 AM

WASHINGTON —

As cotton consumption climbs worldwide, and China continues to suck up a large part of the worldwide supply, cotton prices are now at their highest levels in two years, and expected to climb even higher for the cotton crop being planted now, according to a monthly update from the International Cotton Advisory Council (ICAC).

After jumping up by almost 36 percent, to $0.57 a pound from $0.42 last year, prices are poised to rise another 10.5 percent for the cotton crop scheduled for harvesting next year, to $0.63 a pound, the cotton cartel projected.

Prices for the 2003/04 cotton plants "are starting with international prices at their highest level in two years," said the ICAC. "World production is currently forecast to rise by 1.8 million tons, up nine percent, to 20.9 million tons in 2003/04, while cotton mill use is projected up 200,000 tons to 21 million tons. These supply and demand estimates suggest that the Cotlook A Index will average $0.63 per pound next season," the highest average in six seasons, but still below the 30-year average of $0.70 per pound.

Virtually all of the six cents increase forecast for the crop being planted now, said the consortium of worldwide cotton growers, is due to the incredibly fast pace of rising demand from China. Net imports by China are projected to rise more than twelve-fold, the ICAC is forecasting.

Looking out, the ICAC commented, "Prices of synthetic fibers are rising sharply following the surge in crude oil prices. Commodity prices tend to follow the rise in oil prices and the decline of the U.S. dollar also has a positive impact on cotton prices in dollars. However, higher energy costs have been a strong factor in previous economic recessions. Consumer and business confidence weakened worldwide due to uncertainty about the duration and the consequences of the war in Iraq, raising concerns about world end-use cotton consumption."

World Cotton Supply and Pricing Forecast
in millions of tons, except for cotton prices